ETF Update: The Agricultural Opportunity

As investors survey the landscape of beaten-down ETFs, different methods come into play.  Some are looking for value.  Some seek sectors with rebound potential.  Others look for news-driven potential.

When we examine ETF charts and our model output, we see the results of this analysis.  We see factors like Trends and Cycles and try to Anticipate the best opportunities.  It is an interpretation of how the market is reacting to fundamental considerations.  Each week we choose a sector for a more detailed focus.

Spotlight on Agriculture

We follow the Ag sector via the Market Vectors Agribusiness ETF (MOO).  The security is based upon the DAXglobal® Agribusiness Index.  MOO is down about 36% YTD.  The current P/E ratio is about 17 with a price-to-book ratio of about 2.  The top five holdings constitute over 40% of the fund.  It is a mixture of agriculture and fertilizer companies with about 40% in chemicals, 30% in operations, and 20% in chemicals.  About half of the group is US based.

Tom Lydon picked up this connection right after the election.  Citing Aaron Task who interviewed James Altucher, Lydon points out the Obama support for ethanol and infrastructure spending.

Jordan Kahn, a colleague at TheStreet.com’s Real Money site,  noted the post-election bounce in MOO, and is adding to positions.

We expect to see other analysts picking up this theme.

Rising in the Ratings

We note with interest the rapid rise in our ratings of the Market Vectors Gold Index (GDX).  This sector moved from #53 to #7 in the rankings.

Weekly TCA-ETF Rankings

Performance in the S&P 500 (^GSPC) last week was very poor, down over 6%.  Our portfolio was a little worse, more in line with the Q’s, down almost 8%.

It remains a time of great opportunity, but the market activity also shows great risk.  We missed much of the downside by getting out of the market in September, and we are sticking with our signal to act in sectors where prices are much lower.

We are looking for a better way to tabulate and report results.  This includes an updated report on the weekly trading program focusing on the top six ETFs in our rankings.  Accredited investors are eligible for our daily trading model, which also includes some discretionary choices.  We are reporting the exact days of trading signals in our weekly updates.  Those interested can see how this would have played out in a weekly trading program covering the entire period where we have revealed the ratings, as well as earlier extensive testing.

Based upon the current ratings, we have continued our recent bullish vote in the Ticker Sense Blogger Sentiment poll. Last week was the first time that we have had a bullish stance since August 18th.

We are very happy with the model signals, and especially the long period of safety during a slow-moving market crash.

Posted in Categories: Contributor, ETFs, External Research, Stocks.

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